Q&A: Buying Without a Warranty

Q I am buying a condo, the developer wants me to waive the implied warranty of habitability? Is this normal? His reason is that they have rehabbed the building and didn't build it from scratch. Should I be concerned?

—Prospective Unit Owner

A “It's not unusual for a developer to seek that from you,” said David J. Byrne, an attorney shareholder with the Lawrenceville-based office of Stark & Stark. “There is no doubt that in New Jersey, an implied warranty of habitability arises in the sale of new homes. New Jersey's courts have held to this position consistently and have found support in New Jersey's New Home Warranty and Builders’ Registration Act. The implied warranty of habitability typically applies even in the context of a condominium created and built out of an existing structure. The implied warranty of habitability has been applied to the sale of a newly-constructed commercial building. A subsequent purchaser has been permitted to sue the builder-vendor of a new home for damages arising out a breach of the implied warranty of habitability. Cases in New Jersey support the proposition that the same principles that led to the expansion of the warranty of habitability in the case of a builder-vendor of a new structure were similarly applicable to a rebuilder-seller of a used, but fully-renovated home.

“The relevant court wrote that, at least where an existing home is “so substantially reconstructed by a rebuilder that the end product, when placed on the market, is the functional equivalent of a new house, then an implied warranty runs from the reseller to the purchaser who buys in reliance on the structure being fit for intended residential purchase.”

“A question remains as to the validity of express disclaimers of implied warranty by builder-vendors. New Jersey law does provide guidance as to the enforceability of disclaimers of other implied warranties. Pursuant to N.J.S.A. 12A:2-316(2), both the implied warranty of merchantability and the implied warranty of fitness for a particular purpose may be disclaimed. To disclaim the warranty of merchantability, the disclaiming language, when written, must be conspicuous, and the disclaimer must include the word “merchantability.” To disclaim the warranty of fitness for a particular purpose, the disclaimer must be in writing and conspicuous. Both warranties may also be disclaimed by expressions like “as is,” “with all faults” or other language which “in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty.”

“As to the enforceability of clauses purporting to disclaim or waive the implied warranty of habitability, jurisdictions across the United States take varying approaches. In some states, a disclaimer is enforceable but must be expressed in clear and conspicuous language which fully discloses the specific protections that are being waived and the parties’ intent that the warranty not apply. In others, disclaimers of the warranty of habitability are invalid as a matter of public policy. Given the recognition by New Jersey courts of a “far-reaching warranty of habitability,” and the expressed intention of the New Jersey Legislature to protect homeowners resulting in the New Home Warranty and Builders’ Registration Act, any disclaimer or waiver of the implied warranty of habitability would be strictly construed."

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